Thames Water admits ‘letting down’ customers on leakage

Water company is on "trajectory for recovery" for leakage targets which may take until 2020

Thames Water has admitted it “let down” customers on its leakage performance as the company pledged to return £40 million of penalties to customers.

The company told Utility Week it will not meet its target for leaks once again this financial year and potentially next year as well.

It made the announcement as the group posted half-year results for the six months to 30 September 2017, which showed underlying profit fell to £281.5 million down from £301.8 million for the same period last year.

Outgoing chairman Sir Peter Mason, said: “Our leakage performance over the last year has let down our customers and stakeholders and we’re working hard to improve our performance.”

He said the company’s outcome delivery incentive penalty for leakage was due to be applied to bills after 2020, along with other penalties incurred during 2015/16 and 2016/17.

“However, we’ve decided to return the £40 million of penalties to customers now,” Mason said.

He added: “Inflation and other factors were expected to increase bills by 4.6 per cent from 2018/19. As a result of bringing forward the penalties the expected increase in bills for next year has been halved.”

Steve Robertson, chief executive of Thames Water, told Utility Week the company hopes to bring its leakage performance into target by the next Asset Management Plan (AMP).

He said: “We’re likely to miss our leakage target next year as well, but we are on a trajectory for recovery, which will probably take until 2020.”

Thames Water said it will also not be paying dividends this year and it will “divert resources” to tackle issues such as leakage.

Robertson explained the company has installed 6,000 loggers into its water network as a pilot scheme to help improve leak detection and gain insights based on analytics. “We’re on the right track but there’s still a way to go,” he said.

Talking about the Thames Water’s decision to pay customers earlier than required, Robertson said: “We understand for some customers every penny counts and its important to us to put money into the pockets of customers sooner rather than later.

“The bigger picture is the symbolic value and our relationship with customers. It’s about recognising we have failed to deliver on our promises and dealing with it.

“Our priority is to invest in people and infrastructure to support customers,” he said.

The company’s interim report for 2017/18 showed £533 million was invested in infrastructure in the period, with more than £12 billion invested in the last 12 years.

Last week, Thames Water announced it had appointed Ian Marchant as independent chairman, and asked him to lead a review of the company’s corporate structure and governance.

The review will be conducted with the intention of closing Thames’ Cayman Islands subsidiaries as the water company looks to ensure “best possible transparency” for customers and stakeholders.

Brandon Rennet, chief financial officer at Thames Water, told Utility Week he would be “disappointed” if the company has not managed to fully close the Cayman Islands subsidiaries by the end of next year.

He said he could not be sure exactly how long it would take but explained Thames has already started “working on it” and has been approaching bond holders.

“It’s a high priority for us and we will do it as quickly as we can,” he added.

In a statement released with the financial results, Robertson, said: “Both our new and existing shareholders fully support the refreshed management team, and are aligned with our vision. They will not be paid a dividend this financial year, while we all focus on making the right long-term investment decisions for our customers.”